Automobile Sector facing challenges
The automobile sector is facing a tough period in their Indian-oriented operations. Popular entities like Tata, Mahindra etc were forced to shut down some of their plants due to the sales slump which started towards the end of June. Auto sales have recorded the lowest in two decades which is alarming for the Indian automobile industry–the fourth largest auto industry in the world.
Economic Slowdown
While the nation is facing an economic slowdown, the automobile industry, which is a major contributor to the Indian economy, going downhill will make matters worse. Automobile industry experienced a sales slump of up to 31%. The auto industry contributes 7.5 per cent of India’s GDP and a 49 percent of manufacturing GDP with a huge economic multiplier impact.
Aftermath
The direct effect of the slump is an overburdening of revenue. To push sales, automobile giants are forced to offer huge discounts to deal with sales. On a consumer perspective, it is a good time to purchase cars. But the automobile industries are facing an urgent need to recover from the slump so as to return to normal phase of operations.
Auto giants looking for recovery
Maruti Suzuki is offering a cash discount of Rs 50,000 on its popular model Dzire. Hyundai is offering cash benefits of about Rs 60,000 for i10. Apart from these, Honda Motors India is offering cash discounts of up to Rs 40,000. As an aftermath of the slump, inventories are piling up in the showrooms which force the companies to sell products at a discount. Though discount is a counter measure, it cannot contribute or benefit the companies in the long run.
